Episode 5 - Corporate Monopolies Are What Ail Us
Full Transcript and Sources
Welcome to Toil, episode 5. Today I’m going to dig deeper into something I previewed in “Episode 2: Capitalism Requires Government”, and that is anti-trust, or anti-monopoly laws. Now, there are no silver bullets to solve all our policy failures, but if I had to choose one that could create a domino effect of solving so many other issues AND giving the American people more power to solve more issues, it would be passing stronger anti-monopoly laws and fully enforcing all of these laws - and our existing ones. And this is because anti-monopoly policy is all about POWER - and it matters not only for economic policy that has real impact on our lives, but it also impacts our elections. People who take advantage of these systems can amass huge amounts of wealth and power and then leverage that wealth and power to control our elected leaders and regulators to further structure our economic system to their advantage. Anti-monopoly laws seek to restrict this power.
These laws are all about preventing one or a few companies from accumulating too much power in a market; from becoming so large - through consolidation (we’re talking merger and acquisitions) or forcing other businesses out of business unfairly. This gives monopoly corporations power to set prices (which they often set as high as they can), to set wages and working conditions (which they often set as low and as poor as they can)) and to stiff suppliers, cut corners on quality, and to over-use or pollute our shared common resources - our water, land, and air.
Monopoly power is so harmful to our economy and our FREEDOM because it eliminates COMPETITION. Our American capitalist system, the American dream, relies on FAIR (crucial adjective here) COMPETITION. It’s fairly well understood that our system needs competition, but FAIR competition does not always get its due. A business could burn down another business and that is technically competing. But we would never allow that, our laws prohibit this. It’s not fair competition. Yet there are many other tactics that achieve the same outcome as burning down someone’s business, but we’re not enforcing those laws. We should.
Only with FAIR competition can hard work be the deciding ingredient in someone’s success. With FAIR competition, Americans starting small businesses can compete with other businesses, even slightly bigger ones, with better products, better services, and better employee satisfaction. With FAIR competition between companies for workers, workers can leave bad employers that pay or treat them poorly for better employers, and the hardest workers are rewarded with better jobs and better wages. With FAIR competition, customers can shop around for the best products, services, and prices. With FAIR competition, suppliers can sell to buyers who pay better or agree to fairer contracts. With FAIR competition companies can face consequences for polluting or using too much of a community’s water supply or energy. But without fair competition, monopolies can do whatever they want and small businesses can’t compete, communities can’t fight their massive polluting power, and consumers, workers, and suppliers have no other options when they’re abused and underpaid. This means that hard work matters less and less, it’s all about whether you already have that monopoly power.
Now, monopolies can form in basically two ways: consolidation, through mergers and acquisitions, and through a host of illegal anticompetitive practices that force any potential competitors out of business. Today I want to walk through how several groups of people are hurt by this monopoly power.
SMALL BUSINESS
Let’s start with small businesses. When monopolies exist in a sector, it’s really difficult for new businesses to enter that sector. That’s one of the core parts of the American Dream, that if you want to and work hard enough, you can start a business; you can become an entrepreneur. Well, if the industry you want to start a business in is highly concentrated and therefore controlled by monopolies, this could be impossible, no matter how hard you try. Monopolies will always be able to undercut a new small business on almost every single aspect as they’re trying to get started. Which leads us to those illegal antimonopoly practices.
Let’s start with predatory pricing. Monopolies have the wealth to lower prices, even below their own cost, for long enough to put new or small businesses out of business. Then, once that competition has been eliminated, they raise their prices back up, usually higher than they ever had them. Amazon is famous for doing this. Let’s start with books. In Amazon’s first six years of business, it lost $3 billion selling books below costs. This strategy wiped out countless bookstores and allowed Amazon to capture the book market. Today it controls half of all books sales and more than three-quarters of the e-books market. (Stacy Mitchell, testimony to FTC, December 2024).
Amazon applied this same tactic to the shoe retailer Zappos. Zappos was doing really well and doubling its sales between 2004 and 2007, leading Amazon to try to buy the company. After Zappos refused, we see Amazon start to sell shoes at a loss. Amazon lost $150 million to under-sell Zappos, but it paid-off. Zappos, couldn’t afford to go into the red $150 million and had to finally agree to be acquired by Amazon. Amazon did this again to crush diapers.com, losing as much as $100 million. (Stacy Mitchell, testimony to FTC, December 2024).
There is data to suggest that Amazon is doing this to many companies as part of its core business strategy. For example, in 2023, third-party sellers (most of them small businesses, who have no choice but to use amazon as our economy has become so monopolized), paid Amazon $170 billion in fees. Analysts believe these fees are significantly higher than Amazon’s actual costs to fulfill these third-party orders. This difference should then show up in Amazon’s profits, but we don’t see that, which suggests that Amazon is using this revenue stream to fund its losses to push competitors out of business, like zappos, diapers.com, and numerous book sellers. (Stacy Mitchell, testimony to FTC, December 2024).
Okay, now let’s look at price discrimination, which is a slightly different tactic monopolies use to push small businesses out of business. When deploying this tactic, monopolies are violating a law from 1936 that is hailed as the “Magna Carta of Small Business”, the Robinson Patman Act. The RPA is meant to protect small businesses from monopolies undercutting them on price through bullying suppliers. We’re talking about the Walmarts of the world forcing their suppliers into giving them lower prices than they give other smaller buyers. They can do this because they have accumulated so much monopoly power that suppliers can’t survive without their business, so they must meet their demands. And not only pricing demands, but also quantity and timing demands, like during Covid when we faced supply chain issues. Remember when stores were running out of toilet paper? Walmart demanded that all of its suppliers meet 98% of their shipments. In order to even attempt this, suppliers had to deny supplies to their smaller buyers and smaller local grocery stores suffered empty shelves.
But back to price. We’re not talking about lower prices for bigger buyers buying in bulk as they achieve economies of scale (often through illegal consolidation), those discounts ARE allowed by law. The RPA focuses on price discrimination, when monopoly buyers use their monopoly power to force even lower prices than they would get by buying in bulk. This is a major reason that Walmart’s prices are so cheap. Not only do smaller stores not have that monopoly power to get the same prices that Walmart does, but their bullying creates what is called the “waterbed effect”, referring to how the water moves up on one side of the bed when someone lays down on the other side. Meaning suppliers actually RAISE the prices for the smaller buyers to make up for the low discounted price they were forced to give to big monopoly buyers like Walmart; hurting small businesses even more.
Failure to enforce the RPA is a big reason so many of our small towns have died; the small local businesses in our towns can’t compete with these massive monopolies when they’re allowed by regulators and politicians to force suppliers into lower prices and force a higher price on our small local businesses. There is also a lot of research on how food desserts, in particular, exist because of failure to enforce the RPA. Many small local grocers didn’t go out of business because they were in poor areas without enough customers who could afford to shop there; they were pushed out of business because of price discrimination by big buyers like Walmart. I link in the notes to an author who has written extensively on this.
Let’s walk through a theoretical example. Consider two shoe cobblers in the same town [side note for any gen z or alpha listening, cobblers fix your shoes and yes they still exist], as I said earlier, we wouldn’t allow one to burn down the other’s business as a method of competition. That’s clearly illegal. Anti-monopoly laws just say it’s also illegal for one cobbler to bully the supplier of leather to both cobblers for a cheaper price than the supplier offers to the other cobbler. Preventing this bullying forces both cobblers to compete on offering a better product or better customer service. Or, let’s use this same example with allowing mergers and acquisitions. Let’s say you have ten thriving shoe cobblers in the same town. Should our elected town leaders allow one shoe cobbler to buy up the other nine so that we now only have ONE cobbler company for the entire town? This now means that cobbler can raise prices, pay its workers lower wages, provide lower quality and service, like take weeks to fix your shoe, and everyone in the town just has to deal with it because there are no other cobblers they can go to! And if someone wants to start a new cobbler business to address this problem, the massive monopoly cobbler that now exists can undercut them on price so much it will likely be impossible for the new cobbler to stay in business. See how to truly have a FREE and OPEN market, we need just a bit of government regulation to keep everyone playing by the same rules. I got this cobbler example from the author of several papers on the importance of enforcing the RPA. I link in the notes to several of them (here, here, and here).
It’s not government over-regulation to keep our economic market fair and more dynamic. If everyone is playing by the same rules in a market, then those who succeed are those who work the hardest, those who offer better products and services, those who can innovate, those who treat their workers and customers well, not those who just break the rules.
WORKERS
All of this monopoly activity is also terrible for workers.
First off, smaller businesses are major job creators, so crushing small businesses hurts workers. In the late 1970s a movement to stop enforcing antimonopoly laws started taking off. Since then, the per capita rate of new business formation has dropped in half.
Second, consolidation means fewer jobs; when corporations merge, they almost always lay off workers.
And third, when an industry is so consolidated and controlled by a monopoly, workers have no other choice for work, so they must accept the lower wages and poor working conditions typically offered by a monopoly. And even when there might be 4 or 5 companies controlling an industry, there is only ONE in a regional area, so unless you’re able to move, you have only ONE choice. Many dominant monopoly companies also force employees to sign non-compete agreements; preventing them from working for a competitor, if there is one, for a certain amount of time. The Federal Trade Commission (FTC), one of our key anti-monopoly enforcers, under President Biden issued a rule banning these non-compete agreements, but a federal court blocked it and Trump’s FTC has abandoned action on it saying it won’t pursue an appeal. This is really bad news for American workers.
SUPPLIERS
Moving on to suppliers. Beyond suppliers being bullied by monopolies like Walmart as I discussed earlier, let’s look into a specific example of supplier abuse in the food and agriculture sector. Suppliers here are farmers and ranchers. They grow and raise our food and supply it to massive monopoly corporations - their only option. If we’re not enforcing antimonopoly laws, we’re not protecting our farmers and ranchers. Consolidation is really bad in this sector and farmers and ranchers are increasingly going bankrupt.
To understand this let’s start with a key concept in the monopoly world: “CR4”. This refers to the concentration ratio (CR) of the top four companies in any industry. Economists find that anticompetitive behavior, or market abuses, like the predatory pricing and price discrimination I talked about, and low wages - are likely to occur whenever the top four companies control more than 40% of a market, in other words when the CR4 is 40%. Well, the CR4 is between 60-90% across almost every single part of the food and agriculture market. I link in the notes to a page of data and graphics showing this, put out by a great organization, Farm Action, working hard to fight this.
Let’s look at meat-packing specifically, where the top four firms control 85% of the market! Definitely check out the link I put in the notes because there is a great image showing that while you may see the over 70 different marketing brands in the grocery store, they’re almost all owned by either Tyson, Cargill, National Beef, or JBS. What this means is that if you’re a rancher or farmer, you basically have no negotiation power or options on the price you get for the animals you bring to these meat processors. You have to take whatever they give you because you have no other option. In most places, one of these companies is the only option within driving distance for a farmer or rancher. And if you could access one of the other three, you’re not going to find a better price.
This consolidation has put so many smaller and mid-sized operations out of business. Between 2002 and 2022, roughly 58,000 feedlots (72%), 18,000 hog farms (23%), and 56,000 dairy farms (61%) exited the market. And with only four companies, it’s so easy to price and wage fix. These Big Four meat-packers settle tons of price-fixing lawsuits every year, with settlements in 2025 reaching hundreds of millions of dollars already. So, consumers are paying more and more while less and less is reaching the ranchers. In 1970, 70% of every dollar that consumers paid for beef went to the cattle ranchers, today it’s closer to 30%. (Farm Action).
Let’s look at chicken farmers. The CR4 for chickens that we eat is 60% - across Tyson, Pilgrims Pride, Wayne-Sanderson, and Perdue. These companies have enormous power over chicken farmers across the U.S. and they use it. There is also growing evidence that these four companies coordinate with each other to control different regions so farmers in that region effectively only have ONE choice. More than 97% of chicken farmers in the US work with a big producer.
To supply these companies, which again are usually the only buyer available to them, chicken farmers must sign exploitative contracts that control every single aspect of HOW they raise their chickens while putting all the liability for failure on the farmer, even if the directives from these companies are the reason a farmer fails. The horrible conditions we all see and hear about in the news, chickens who peck each other to death, whose legs fall off because they’re fed to become so heavy their legs can’t hold them and they’re kept in cages or spaces so small they can’t walk around; these farmers are forced into raising the chickens this way. They have to use the medicine the processor tells them to, the lighting and water schedule the processor dictates, the cage sizes, the expensive equipment they must buy with their own money, everything is in the control of the processor, not the farmer.
If the farmer doesn’t follow these rules, they’ll start receiving sick chicks, or less pay, or no pay, or just have their contracts cancelled or not renewed. And they never know how much they’re going to get paid, these Big Four monopoly processors pit farmers against their neighbors; paying them a price based on the relative size of their chickens compared to their neighbors - while prohibiting them from talking to their neighbors. They can’t share how they’re being told to raise their chickens or how much they’re getting paid. The processors even do experiments on the farmers without their knowledge. For example, if Tyson wants to try out a new kind of feed, it could force 5 out of 50 farmers in a region to try out that feed. If those 5 farmers produce skinnier chickens, they suffer the lower price they get for those smaller chickens, and have no idea they were part of an experiment and that the other 45 farmers didn’t use that feed. Tyson could do the same thing with new dimming techniques, or test the breaking point of farmers to figure out at what point they earn so little that they quit - and then structure contracts to keep farmers just barely in business. (Break ‘Em Up, Zephyr Teachout)
Farmers have spoken out about these abuses, in 2010 the DOJ and USDA held hearings around the country to investigate these issues and farmers lined up to testify. However, after hearings, some farmers who spoke out started getting bad chickens and bad paychecks and were forced out of business. This scared many farmers into silence.
This model with chickens has spread to almost all poultry and pork production, as well. And not because this model is better, clearly, it’s because in the 1980s, Ronald Reagan started a deregulatory revolution that meant almost no antimonopoly enforcement, which led to a merger spree across all industries, including chicken farming. I’ll read now directly from a great book on this topic, Break ‘Em Up, referring to breaking up monopolies, by Zephyr Teachout. She writes:
“Chicken processors seized the chance to consolidate power. Tyson, Perdue, and Pilgrim’s went on a buying spree… first they bought up all the processing plants in a region, then they collected every company that had anything to do with chicken distribution. They bought feed mills, hatcheries, transportation systems, packagers, and marketers. Live chickens die if they travel too far, and dead chickens rot. Therefore, chicken farmers can only sell within a certain radius; if all the processing plants in that radius are run by one company, a farmer has no choice but to follow the dictates of the processor to get the food to market.” (p23)
She explains that it wasn’t always like this:
“For most of the twentieth century, chickens were raised by farmers who bought feed from independent feed mills, bought chicks from hatcheries, and sold chickens to one of many different local processors. Each type of company sold their product on an open market. Farmers made choices about how to build their chicken houses, how to treat their workers, how to treat the animals, how big or small to grow, how much risk to take, what breeds to look into, and how to spend their Sundays.” (p22)
If you’re still thinking, “well it was just good business sense for those chicken processors to go on that merger spree. The government shouldn’t infringe on their freedom to do that.” I ask you to think about how allowing a very small number of businesses, often 1, 2, 3, or 4, the freedom to do that infringes on the freedom of the rest of us: over 340 million Americans. How it infringes on the freedoms of the farmers, the feed mills, the hatcheries, the packagers, and the consumers.
CONSUMERS
Now let’s look at how consumers are harmed by monopolies. This is actually the only group of stakeholders that antimonopoly enforcers HAVE considered since the late 1970s, yet regulators still approved merger after merger, believing corporations’ claims that their proposed mergers and acquisitions would allow them to lower prices, only to then gain a dominant position in the market, maybe offer lower prices long enough to push other competitors out of business, then raise prices higher than before their merger.
Let’s look at this in the grocery store where it APPEARS like we have a lot of options but in reality, a small handful of companies own almost all the different labels we see. 70% of cereal is made by 3 corporations: Kellogs, General Mills, and Post Holdings. 90% of all soda pop is made by 3 corporations: Pepsi, Coca-Cola, and Keurig Dr. Pepper. The Guardian and the non-profit Food and Water Watch conducted a joint investigation in 2021 of 61 popular grocery items and found that for 85% of these items, four firms or fewer, controlled more than 40% of market share. Remember that CR4 term I mentioned earlier when talking about the meat packing industry? That’s what we’re talking about here: it’s looking at the concentration ratio of the top four firms in a market and if it’s higher than 40% we see monopoly abuses. And this investigation found that 85% of our groceries are above this 40% threshold. It should be no surprise to us then that researchers released a report last year finding that corporate profits account for over HALF of inflation. Monopolies can do this because they control all our choices - we have to pay what they charge and we have to eat. They can raise prices on us while only giving 15 cents of every dollar to the farmer. THIS is what monopoly power can do.
COMMUNITIES
Lastly, let’s talk about how monopoly power harms communities. Corporations have consistently shown that they will use their monopoly power to pollute or take whatever they want from communities with little to no consequences. Just last October, Tysons, one of the four companies controlling chicken farmers I talked about, was found to have dumped millions of pounds of toxic pollutants into US rivers and lakes. I also link in the notes to a ProPublica report just released highlighting many examples of serious health issues in communities near polluting corporations. The report also reveals that the Environmental Protection Agency (EPA) required 20 industrial facilities to temporarily install air monitors around their perimeters to confirm how bad the pollution actually was, because up until that point, we allowed corporations to do their own monitoring and reporting on emissions. They found that in virtually every case, actual emissions were much higher than the corporations’ estimates. In response, last year the Biden Administration, despite strong industry opposition, planned to require more than 130 industrial facilities to install the same air monitors. The Trump Administration has stopped this plan. You may think, well that sounds bad, but this is just about collecting data. True, we need to actually DO something, against this monopoly power, to protect the nearby communities. Data helps us do that. Proving the actual emissions, knowing how much toxic waste is in the air over communities, dumped into their water and land, helps us fight for protections. Now, it’s likely we won’t have this data for many years.
We also see community harm in a big way today with AI data centers, which are polluting the air we breath and consuming hundreds of billions of gallons of drinking water every year across the country, even in water distressed areas like Phoenix, where farmers and families have had to go without water, or The Dallas, Oregon where Google’s data centers now use more than a quarter of all water used by the city. We’re also subsidizing the cost of energy for these billion dollar tech monopolies. Electrical utilities profit by building out new infrastructure, like new power plants and transmission lines, so they are incentivized to attract AI data centers whose energy needs would require that they build this infrastructure. They do this by offering discounted rates to the AI companies. They can offer these discounted rates because they raise prices on the rest of us. It’s like the “waterbed effect” I talked about earlier, where suppliers raise prices on smaller buyers to make up for the discounts they were forced to give their bigger buyers. It is the monopoly power of Amazon, Google, Meta, Microsoft, OpenAI, xAI that makes this obvious unfairness possible.
CONCLUSION
For all of these reasons, monopoly power harms Americans. We as small business owners, workers, suppliers, consumers and members of the communities where we live suffer under monopoly corporations’ unchecked power.
But there is a second major reason monopoly power harms us, I alluded to it at the beginning. Monopolies have the power and wealth to control our elected leaders and those they appoint to enforce anti-monopoly laws - in both parties. Billion dollar monopoly corporations use their massive wealth to elect those who will allow them to continue amassing and abusing their power and to prevent those already in power from succeeding in stopping them.
What can we do about this? We’re in a catch-22 where we need the right people in power to fight back against monopolies but we can’t get those people in power because the monopolies will fight to prevent them from winning their elections. So, we must pursue two tracks in parallel because small wins along the way in each track can help our efforts in the other track. One track is electing and pressuring leaders (and those they appoint) - at the federal, state, and local levels - to enforce existing anti-monopoly laws and pass stronger ones.
And second, in parallel, we must eliminate the mechanisms these monopolies have to use their money and status as dominant market players to exert control over our elected leaders and anti-monopoly enforcers.
We can start by getting private money out of our elections. This must include overturning the Supreme Court decisions Citizens United and Buckley v. Valeo, which together allow corporations and billionaires to flood unlimited money into our elections. This second track needs its own episode, so stay tuned.
In the meantime, make fighting monopolies an issue that you vote on, that you ask your representatives about in town halls, that you call them about. And remember this isn’t just a federal level issue. State legislatures and State Attorneys General have a lot of power to protect us from monopoly abuses in our states. It was several states working together that blocked Kroger and Albertson grocery stores from merging last year. And our locally elected leaders have the power to keep monopolies, like Walmart for example, from gaining approval to open up in our towns.
Still, I realize that actually curtailing the power of these massive monopolies can seem impossible. And here is where I have some good news. We’ve been here before and we’ve won. In the late 1800s and early 1900s, massive monopolies were forming and using their power to crush competition and workers and exert influence over our government, and guess what we did? We broke them up. Yes, you can break up a big company. It’s called divestiture. Don’t let anyone tell you it’s too complicated and can’t be done. We did it and companies often do it themselves to re-focus on core business, achieve some kind of operational efficiency, or sell off parts to raise cash. It’s very doable. Two of the most famous examples are the Roosevelt Administration suing to successfully break up John D. Rockefeller’s Standard Oil Co. and J.P. Morgan’s Northern Securities Co., a railroad monopoly. Rockefeller and Morgan were the corporate moguls of their day and the government successfully regulated their harmful power.
What’s at stake is not just what products are available to us at what prices, or the wages we’re forced to accept, or whether we can start a small business. Our very democracy is at stake if we are controlled by billionaires instead of represented by those we elect. Anti-monopoly laws are about FREEDOM. What could be more American?
I’ll leave you with a quote from Senator John Sherman, Republican of Ohio, who introduced the first major anti-monopoly law we have on the books in 1890, the Sherman Antitrust Act, which he introduced as a “bill of rights, a charter of liberty”. He said:
“If we will not endure a king as a political power, we should not endure a king over the production, transportation, and sale of any of the necessities of life. If we would not submit to an emperor we should not submit to an autocrat of trade, with power to prevent competition and to fix the price of any commodity.”
He’s right, our economic and political freedom is threatened when we allow corporations to dominate our economy and our government. If America was founded to fight the political and economic domination of a King, it is inherently American to fight today for freedom from corporate kings.